NewRiver Retail Limited
("NewRiver" or "the Company")
Expansion of convenience stores to be leased to The Co-operative Group
and formal completion of transaction
NewRiver Retail Limited (AIM: NRR), the UK REIT specialising in value-creating retail property investment and active asset management, announces that it has completed and expanded the agreement with The Co-operative Group Limited (the "Co-operative Group") to lease (the "Agreement") a significant element of the public house portfolio (the "Portfolio") acquired from Marston's PLC by NewRiver's joint venture partnership with BRAVO II (a fund advised or managed by Pacific Investment Management Company LLC) on 28 November 2013.
Highlights:
• Completion and expansion of the conditional agreement announced 7 April 2014
• Agreement confirmed to lease 63 new convenience stores ("C-Store") from public house portfolio - increased from original 54
• Total of 215,232 sq ft of new retail space to be created over two year phased development programme
• Some £3.85m to be realised in additional proceeds from incentivised completion programme
• Rental income varies between £15.00 per sq ft to £17.50 per sq ft
• Institutional quality lease length of 15 years with no break option with RPI-linked rental increases
• Rapid delivery of NewRiver's stated strategy for the public house portfolio meeting the growing demand from major food store operators for C-Store portfolios
• Majority of C-Store developments to be constructed on surplus land and car park areas, thereby protecting ongoing pub operations
The Agreement is the completion and expansion of the original conditional agreement announced 7 April 2014.
NewRiver has confirmed the Agreement for Lease of a portfolio of 63 new C-Stores across the UK to The Co-operative Group totalling 215,232 sq ft of new retail space, a 7.6% increase in space from the original conditional agreement of 54 stores announced 7 April 2014.
The lease terms remain at 15 years with no break clause and an annual RPI-linked rental increase formula capped at 4% and collared at 1%. The rental income agreed varies between £15.00 per sq ft and £17.50 per sq ft. The C-Stores will range in size from 3,000 sq ft to 4,200 sq ft and will benefit from dedicated and shared car parking spaces ranging from 10 to 25 spaces.
The Agreement is performance-incentivised whereby NewRiver will receive additional payments upon delivery of various tranches of the Portfolio. With the increase in the portfolio, the total fee payable is now £3.85 million, up from £2.70 million as announced in April 2014.
The majority of the C-Store developments will be constructed on surplus land and car park areas thereby protecting the value and income generated by the pubs. This will offer synergy between the new retail and existing pub use. The remainder of the developments will involve conversions and new builds on the site of the existing pubs. In a few instances, and reflecting the wider potential within NewRiver's pub portfolio, residential units will also feature alongside the C-Store development. NewRiver will be working closely with pub landlords.
For the majority of the 63 C-Store developments, detailed planning applications will be submitted within the next two months and it is anticipated the phased construction programme will commence in the first quarter 2015. Given the average construction period of 4 months, NewRiver expects to start delivering for fit out the new C-Stores to The Co-operative Group in the summer of 2015.
The 202 pub portfolio was acquired by NewRiver in November 2013, for a total consideration of £90 million, from Marston's PLC, the public house operator and brewer, with the primary intention of providing retail space to meet the growing demand from the UK's major food operators for convenience store premises by converting land and buildings within the pub portfolio to alternative use, principally convenience stores. Importantly, at completion Marston's agreed a leaseback arrangement to lease the entire portfolio for a minimum term of up to four years for a total annual rent of £12.2 million reflecting a net initial yield of 12.8%.
Since the acquisition in November 2013, the pub portfolio continues to perform well benefitting from an increase in turnover and beer sales leading to an increase in the EBITDA that on an annualised basis is now higher than the guaranteed rent that Marston's pays NewRiver.
The principle focus of NewRiver over the last nine months has been to complete the leasing portfolio with The Co-operative Groupwhilst progressing development plans to unlock further value for the remaining pub portfolio. Importantly during this time the Company has continued to receive a strong rental income from the portfolio.
With the Co-operative Group Agreement now complete the Company will continue to drive forward these value enhancing opportunities which will include preparing detailed planning applications to be submitted within coming months for the redevelopment of the surplus land of five of the pubs to residential. In total these five developments, subject to planning consent, will provide 42 detached and semi-detached houses.
Allan Lockhart, Property Director at NewRiver Retail, said:
"This portfolio leasing transaction is the culmination of a tremendous amount of hard work by NewRiver and our design team. Following on from our pre planning application meetings with local authorities, we now look forward to the submission of formal planning applications over the next few months.
On the back of this transaction, NewRiver is set to become the UK's largest C-Store developer in what is the fastest growing area of the food market. We have established an excellent working relationship with The Co-operative Group and we are delighted to be in a position to provide them, with such a large number of new stores as they continue to expand in this competitive market. We believe that these modern C-Stores, operated by one of the UK' s leading C-Store retailers, will provide excellent amenities to the local communities as well as the creation of 1300 valuable jobs."
Steve Murrells, Chief Executive of the Co-operative Retail Division, said:
"The Co-operative Group has a clear vision to establish itself as the best local food retailer in the UK and over the coming years our focus will be to develop and grow our existing convenience estate of over 2,000 shops. The key to our focus is our new store opening programme where we intend to open 150 new stores each year. We are delighted to be working with NewRiver Retail and this significant portfolio is a great example of the innovative and industry leading transactions we are undertaking as a part of our ambitious convenience expansion plans."
- Ends-
For further information
NewRiver Retail Limited David Lockhart, Chief Executive Mark Davies, Finance Director |
Tel: 020 3328 5800 |
Bell Pottinger David Rydell/David Bass/James Newman |
Tel: 020 3772 2500 |
Liberum Tim Graham/Simon Atkinson/Jamie Richards |
Tel: 020 3100 2000 |
About NewRiver
NewRiver Retail Limited is an AIM listed REIT. The Company is a specialist real estate investor and asset manager focusing solely on UK retail with a particular focus on food and value retailing.
The management team, with over 100 years combined experience in the UK commercial property market, actively engages with retailers, stakeholders and consumers. NewRiver Retail is the UK's third largest shopping centre owner by number with assets under management of approximately £740 million principally comprising 27 UK wide shopping centres, 17 high street assets, 1 supermarket, five retail warehouses and a portfolio of 202 public houses principally suitable for conversion to alternative uses. The portfolio has 1,302 occupiers, a total of over 5 million sq ft, total annual footfall of over 110 million and a retail occupancy rate of 95 per cent.
The Company's activities include active and entrepreneurial asset management and risk-controlled development, utilising both its own balance sheet and co-investment joint venture structures.
Founded in 2009, NewRiver has become the UK's leading retail-focused property investment business. The Company's shares were admitted to London's AIM in September of the same year. For more information on NewRiver, please visit www.nrr.co.uk
